Central Banks Feel the Heat From Savers

Mar 8, 2012 8:07 am EST

After years of holding official interest rates near zero, while pumping additional liquidity into the financial system, central bankers are starting to feel the heat from a constituency they have hitherto largely dismissed: savers.

The Federal Reserve’s decision to float the idea of “sterilized” quantitative easing is just the latest sign that central bankers are starting to pay attention to a growing rebellion. In sterilizing QE, the Fed hopes to convince savers that it isn’t embarking on a Weimar-type inflationary binge.

The European Central Bank has made it clear that it does not intend to repeat its LTRO program after the Bundesbank — which may only have rump central banking responsibilities but remains the voice of German savers — grumbled about the ultimate inflationary impact of the ECB’s near limitless supplies of cash to the euro-zone banking sector.